Konecranes acquires Terex’s Material Handling & Port Solutions business to create a focused global leader in Industrial Lifting & Port Solutions

• Acquisition against cash & shares, valuing the acquisition at EUR 1,126 million

• Terex to become a 25% class B shareholder in Konecranes. Class B shares to have restricted voting rights and certain nomination rights

• Synergies of EUR 140 million p.a. targeted at EBIT level, to be implemented within 3 years

• The agreed purchase price represents a multiple of 10.5x enterprise value / 2015 adjusted EBITDA used for valuation purposes, and of 5.3x including run-rate synergies

• Konecranes and Terex to terminate previously announced business combination
   

Konecranes, a world-leading group of Lifting Businesses™, on May 16, 2016, signed an agreement (the "Stock and Asset Purchase Agreement") to acquire from Terex Corporation (“Terex”) its Material Handling & Port Solutions ("MHPS") segment (the "Acquisition") against consideration consisting of cash and shares and to terminate the previously announced business combination agreement. The acquisition of MHPS will improve Konecranes’ position as a focused global leader in the Industrial Lifting & Port Solutions market. Konecranes will achieve substantial growth opportunities in the service business as well as critical scale for further technological development. Konecranes’ recent investments in business infrastructure and global footprint optimization will provide significant earnings leverage. Based on 2015 financials, Konecranes and MHPS had aggregated sales of EUR 3,517 million, adjusted EBITDA of EUR 267 million (excluding synergies) and a total workforce of approximately 19,000. (For basis of preparation see Appendix 2: Preliminary unaudited combined financial information.)

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The Stock and Asset Purchase Agreement may be terminated by Terex prior to May 31, 2016, if it enters into, or reasonably believes that it will promptly enter into a legally binding merger agreement with Zoomlion Heavy Industries Science & Technology Co., Ltd., in which case, it will compensate Konecranes with a termination fee of USD 37 million.

Transaction terms

The Acquisition, valued at EUR 1,126 million enterprise value based on Konecranes closing price of EUR 20.60 as of May 13, 2016 on a cash and debt free basis, will bring together a range of leading brands and offer significant industrial and operational synergies targeted at EUR 140 million p.a. at EBIT level within three years from closing. Terex will receive USD 820 million (EUR 723 million) in cash and 19.6 million newly issued Konecranes class B shares, making Terex a 25% shareholder (calculated from shares outstanding on April 30, 2016). The class B Shares to be issued to Terex will be created through an amendment to Konecranes' Articles of Association and will have the same financial rights as Konecranes ordinary shares but are subject to voting and transfer restrictions as well as differing Board nomination rights described in more detail below and in Appendix 1. The purchase price is subject to post completion adjustments based upon the level of net working capital and cash and debt in the acquired business at the closing date. In addition, the number of shares to be issued may be adjusted depending on the performance of the MHPS business in 2016. Also, certain purchase price adjustments may occur based on possible outcomes related to antitrust rulings. (A summary of the transaction terms is included in Appendix 1.)

The agreed purchase price represents a multiple of 10.5x enterprise value / 2015 adjusted EBITDA used for valuation purposes, and of 5.3x including run-rate synergies (enterprise value adjusted for EUR 190 million expected implementation costs and capex). With the transaction, Konecranes assumes certain unfunded pension liabilities. (See Appendix 3: 2015 adjusted EBITDA used for valuation purposes and Appendix 1: Summary of the transaction terms.)

As part of the transaction, Konecranes’ articles of association will be amended to create the new class of B shares and Terex and Konecranes will enter into a shareholder’s agreement ("SHA"). Pursuant to the SHA and changed articles of association, Terex will be entitled to nominate up to two members to the Board of Directors of Konecranes as long as Terex’s or its group companies' shareholding in Konecranes exceeds certain agreed thresholds. Terex's initial Board nominees will be David Sachs and Oren Shaffer as of closing of the Acquisition. Terex will also be subject to certain standstill obligations for a four-year period, as well as more limited standstill obligations following the initial four-year period, and a non-compete obligation with respect to the MHPS business for a two-year period.

The Acquisition is subject to regulatory approvals and other closing conditions, including shareholder approval at a Konecranes Extraordinary General Meeting of shareholders, and is expected to close in early of 2017. If the Konecranes shareholder approval is not obtained, Konecranes will be required to compensate Terex's transaction expenses up to USD 20 million.

As a result of entering into the Stock and Asset Purchase Agreement, the companies terminate the Business Combination Agreement and Plan of Merger announced on August 11, 2015, with no penalties incurred by either party.

Konecranes has agreed to seek listing of American Depositary Shares representing its ordinary shares, on the New York Stock Exchange after the completion of the Acquisition.

Overview of Terex MHPS

Terex MHPS is a leading supplier of industrial cranes, crane components and services under the Demag brand, as well as port technology with a broad range of manual, semi-automated and automated solutions under several brands such as Gottwald. Customers use these products for lifting and material handling in manufacturing and at port and rail facilities. Terex MHPS has manufacturing operations in 16 countries on five continents and operates a sales and service network in more than 60 countries. It has a 50% interest in a Singapore-based joint venture that manufactures industrial cranes in eight locations around the world. Terex MHPS is one of the five segments of Terex Corporation.

According to unaudited special purpose carve-out financial information, sales of Terex MHPS (including Crane America Services) were USD 1,542 million (EUR 1,391 million) and the adjusted EBITDA was USD 111 million (EUR 100 million) in 2015. In 2015, Terex MHPS generated 31% of its sales from maintenance services and spare parts. It employs approximately 7,200 people of which approximately 1,700 are in aftermarket operations. (For further financial information, see Preliminary unaudited combined financial information, included in Appendix 2.)

Industrial Rationale

With the Acquisition, Konecranes will:

• Add critical mass and scope to its global service organization

  • Enlarged combined installed base provides broader opportunities to offer service capabilities

  • Major earnings potential from digitalization of services

  • Combination of strong service networks and concepts creates critical mass to unlock the significant in-house service market

• Reach scale benefits and synergies in industrial lifting

  • Optimization of manufacturing footprint enables necessary production cost savings

  • Scale benefits in sourcing

  • New manufacturing platform positions Konecranes for future market growth

• Combine complementary Port segment technological and marketing capabilities into complete product offering to better compete in global markets

  • Ability to offer comprehensive port solutions to global customers

  • Highly complementary range of products

  • Enhances further strategic customer dialogue

• Create a truly global footprint through the combination of complementary geographic presence

  • Konecranes' presence in Northern Europe, North America and China vs. Terex MHPS' presence in Germany, Southern Europe, South America and Southeast Asia improve ability to serve global customers

  • Critical mass in emerging markets

• Create critical mass for future technology development

  • Industry-leading resources for continued technology development, including automation, software and digitalization

  • Technology leadership of increasingly critical importance

  • Significant scale benefits enhance R&D efficiency

  • Combination benefits from technology development heritage of both businesses

• Leverage  IT infrastructure

  • Significant investments already made in IT infrastructure enable seamless integration

  • Continuous development and high scalability support future growth

Christoph Vitzthum, Chairman of the Board of Konecranes, said: “For Konecranes, this Acquisition is a milestone in building our future. The Acquisition makes it possible for us to realize a long list of synergies and we expect it to create substantial value for our customers and shareholders.”

Panu Routila, President and CEO of Konecranes, commented: “This Acquisition will prove crucial to improving our position as a global partner in services, industrial lifting and port solutions, and at the same time create significant value for our owners. The combination of our businesses brings together a family of leading brands that will provide an excellent platform for further sustained growth, opens new growth opportunities in the service business and creates critical mass for future technology development. Furthermore, the Acquisition allows us to combine the outstanding talent and best practices that each of Konecranes and MHPS have to offer. We already have extensive experience in maintaining Terex MHPS equipment, and are convinced that the complementary range of equipment and differences in geographical footprint will make Konecranes and MHPS an ideal match.”

Synergies

Konecranes is prepared to deliver expected synergies on an accelerated timeline based on its in-depth review of the synergy opportunity and the extensive integration planning work carried out jointly with Terex over recent months. Of the total of EUR 140 million p.a. synergies targeted within three years, EUR 35 million is expected to be captured within 12 months from closing of the Acquisition. Overall, synergies will come from procurement, including supply chain optimization, insourcing/outsourcing and freight and logistics efficiency. Another significant contribution to synergies will be made from operations, including manufacturing footprint and capacity utilization. A third source of synergies will be SG&A, including broader SG&A efficiencies, IT system consolidation and engineering and R&D optimization. One-time implementation expenses are expected to be EUR 130 million, with EUR 60 million of capex expected.

In addition, dynamic synergies related to new opportunities in global service operations are expected to lead to significant earnings growth.

Financing

Konecranes is well-equipped financially to successfully consummate this transaction and to deliver its benefits. Upon completion of the Acquisition, Konecranes will have a sustainable capital structure with expected leverage of 3.5x net financial debt/EBITDA (aggregated adjusted EBITDA). The company targets to reduce its leverage to less than 2.0x within three years after completion of the Acquisition. Nordea and SEB have arranged committed financing for the cash consideration, replacement of existing facilities and net working capital of the combined entity. The transaction is expected to be EPS accretive from inception (adjusted for non-recurring integration costs and purchase price allocation related amortization).

Konecranes’ financial guidance for 2016 published in the January-March 2016 interim report on April 27, 2016, does not incorporate the impact of the now disclosed acquisition on the company’s sales or adjusted operating profit for 2016. Potential implications on Konecranes’ financial guidance for 2016 will be announced later when a reasoned estimate can be made.

Analyst and press conference:

Konecrances’ President and CEO, Panu Routila, will host a press conference to discuss the transaction today at 11:00 am EET at Finlandia Hall’s Terassisali (main building, 1st floor, door M4 or K4), Mannerheimintie 13 E, 00100 Helsinki. The press conference will be streamed live at http://goodmood.fi/webcaster/accounts/konecranes/live/.

The conference can also be joined by telephone. Please dial in 5 to 10 minutes before the beginning of the event:

Finland: +358(0)9 2310 1619
US: +1646 254 3387
UK: +44(0)20 3427 1921
Germany: +49(0)69 2222 10632
France: +33(0)1 76 77 22 41

Event title: Press Conference
Conference id: 4978993

The presentation slides will be available at www.konecranes.com/investors